Their Goal: Make Cryptocurrency Less Scary

If you have a tough time with the idea of putting even a dollar of your net worth into a digital cryptocurrency — Bitcoin, Litecoin, Ethereum, and the like — no sensible person would blame you.

Aside from the price fluctuations, there’s the question of who’s protecting those digital assets. Is it an institution like QuadrigaCX, an exchange for cryptocurrency run from its founder’s laptop, which reportedly lost $140 million in customer funds after the founder died in India in December? Or one like Tokyo-based Coincheck, which had $532 million in cryptocurrency stolen by hackers in January 2018?

“Every time I see one of these exchanges get hacked, or the founder take off with money in some kind of scam, it’s another reminder of how immature this industry is,” says Matthew Walsh, a former Fidelity Investments vice president who helped launch a private fund that invested in cryptocurrency there. “It’s bordering on a joke how immature the infrastructure is — and how dangerous it is.”

But for a growing group of venture capital firms and startup companies in Boston, the dangerous and mostly unregulated realm of cryptocurrency represents an opportunity. They see these digital currencies — which can store value and operate independently of government-controlled monetary systems — eventually becoming as safe for investors as a Bank of America money market fund. That, however, is going to require a lot of new technology. Which they plan to build and sell.

Walsh’s new venture capital firm, Castle Island Ventures, is among them. After he and cofounder Nic Carter left Fidelity, they raised $30 million to invest in what Walsh says is a “whole new category of infrastructure” required to make cryptocurrency safer and more reliable.

Sharon Goldberg and Ethan Heilman cofounded Arwen, a Boston startup trying to make cryptocurrency exchanges more secure.

“The reason we launched the fund is we think a lot of these cryptocurrencies will be investible assets,” Walsh says — even if they don’t feel that way to most mainstream investors today.

Castle Island has already invested in six startup companies, Walsh says, and other local firms like General Catalyst, First Star Ventures, Highland Capital Partners, and Underscore VC have also been writing checks to fledgling cryptocurrency companies.

Highland and Underscore helped incubate a startup called Arwen, founded by a Boston University computer science professor and her doctoral student.

“We’re in the early days,” says Arwen CEO Sharon Goldberg. “But let’s go back to 1999 and using credit cards on the Internet. Nobody wanted to put their credit card number into a website. But you do today, because you trust the encryption. You see that little lock in your browser.”

Goldberg is taking a sabbatical from teaching to build the company, which has eight employees and earlier this month moved out of Underscore’s space into its own office.

She points out that cryptocurrency is designed to be a “decentralized” system — there’s no central bank regulating how much of it there is, just software code running on computers. Yet if you want to exchange one kind of cryptocurrency for another, or turn cryptocurrency into dollars or yen, you need to entrust that transaction to a centralized exchange. “Centralized exchanges are the way to trade this decentralized currency,” Goldberg says. “It’s strange.”

So Arwen is creating a layer of technology that would enable you to convert one currency into another securely, even if the exchange gets hacked or goes offline in the middle of a trade. Arwen’s technology is based on something called an “atomic swap,” which Goldberg explains using the metaphor of a briefcase full of cash. If two people intend to swap briefcases filled with two different kinds of currency, the risk is that you hand your briefcase to the other person and they run off. An atomic swap ensures that each person get the other person’s briefcase, even if the other person tries to split.

Late last month, Arwen launched a “sandbox” environment for demonstrating the technology, and Goldberg says the company is talking with prospective customers. “The majority of our customer calls are outside of the US,” Goldberg says. “In Japan, for instance, there are just a massive number of companies creating ways to buy cryptocurrencies.”

Why is the United States behind? “Regulation is stronger here, and other institutions are more trustworthy,” she says.

Arwen is working on “an important problem” and it could prove “a key missing piece needed to get wider adoption of crypto assets as a real investment asset class,” says Drew Volpe of Boston-based First Star Ventures.

Volpe’s firm last year put money into Everbloom, which is building its own cryptocurrency exchange that tries to solve the issues of trust and reliability “from the ground up.” Everbloom, he explains, is a decentralized exchange that never has to take ownership of the asset itself — similar to Arwen’s approach, the trades happen “trader to trader” using the same atomic swap idea.

Two things could happen to make holding and trading cryptocurrencies more trustworthy, observes Boris Revsin, managing director of Republic Labs, a firm that has made recent investments in the cryptocurrency sector.

One is that trusted financial services brands like Fidelity or Charles Schwab will launch cryptocurrency-related products and services and “offer recourse if something terrible happens” to your money, he says.

But the other is that non-brand name exchanges that today are not trustworthy could start to incorporate technology from Arwen or other companies like it, and begin to build trust with investors.

Either of those scenarios, Revsin says, could encourage more asset managers and investors to move some of their assets into cryptocurrency.

In case you haven’t been tracking it closely, the price of Bitcoin is down almost 60 percent from February 2018. But over two years, the price has risen 240 percent, and more than 800 percent over three years. It’s a risky place to keep your wealth today — but investors and entrepreneurs are betting that just as credit card transactions on the Internet became more trustworthy, that will change.

Author: Scott Kirsner
Image Credit
Image Credit

Canada’s Regulators Might Help Crypto Exchange QuadrigaCX’s Victims After All

Provincial securities regulators in British Columbia, Canada, won’t be investigating the QuadrigaCX scandal. However, new developments could see Canada’s largest securities body, the Ontario Securities Commission (OSC), begin an investigation.

On Friday, according to Reuters, the OSC has confirmed in a statement it will be looking into cryptocurrency exchange QuadrigaCX, where currently $190 million in cryptocurrency has been lost. Though an OSC spokesperson did not confirm if the regulator will conduct a formal investigation, it said:

“Given the potential harm to Ontario investors, we are looking into this matter.”

The OSC’s role, as the Ontario provincial arm of the Canadian Securities Administrators (CSA) is to protect regional investors. In its “2018-2019 Statement of Priorities,” the body committed to “innovative regulation” of cryptocurrencies and actively encourages fintech start-ups in the province.

Canada has yet to beef up crypto regulation and add a more comprehensive legislative framework for the sector. But it has also taken action against illicit ICO offerings and the OSC may well decide to pursue QuadrigaCX further.

Allan Goodman, co-chair of a technology group at Goodmans LLP believes the OSC would first check if QuadrigaCX has breached securities laws in Canada. He stated:

“For example, should (Quadriga) have been registered as an exchange and were any securities laws breached with respect to the trading of the coins on the exchange?”

Earlier, the British Colombia Securities Commission (BCSC) said QuadrigaCX was outside of its jurisdiction. It will take no action to benefit those affected.

A BCSC spokesperson told Bloomberg in an email:

“[BCSC] does not currently have any indication that Quadriga CX, the crypto asset trading platform, was trading in securities or derivatives or operated as a marketplace or exchange under British Columbia securities laws.”

QuadrigaCX – An Elaborate Scam or an Unprecedented, Unexpected, Scenario?

The QuadrigaCX scandal is unprecedented. Its founder Gerald Cotten, reportedly the only person with access to QuadrigaCX cryptocurrency cold storage died suddenly in India. There were no protocols in place to allow another QuadrigaCX employee access and now no one can reach the $190 million belonging to QuadrigaCX users.

There is ongoing speculation about whether Cotton is really dead. Or if this could be some elaborate scam, as well as if QuadrigaCX really held cryptocurrency balances in cold storage.

One user, Ethan Lou, with $2,000 invested in the platform and who met with Cotten in 2014, writing for the Toronto Star says:

“Cotten’s death in India is suspicious. Vancouver’s Quadriga had been having cash-flow problems for months. Twelve days before Cotten’s death, the man made a detailed will, including money for his Chihuahua dogs — how did he neglect his laptop password?”

Last Tuesday, a judge gave QuadrigaCX a 30 day stay on claims from creditors and potential lawsuits while the exchange continues to try to gain access to Cotton’s laptop and the millions in lost cryptocurrency.

Author: Melanie Kramer 
Image Credit: Source: Shutterstock

Bitcoin Bulls Stampede Past $3,700 & Wider Crypto Market Rallies with Them

Everyone knew a breakout was coming. A tight trading pattern lasted for weeks, which is almost always a precursor to big activity, one way or the other. In the case of Bitcoin and most everything else in the crypto market over the past 24-hours, things went very positive.

Bears lost their stranglehold on the market and plenty of short positions were likely vaporized. Traders in recent weeks had become accustomed to movements of sometimes less than $100 in a whole day. Like as not, plenty of positions were primed for movements of that size. But virtually every market saw Bitcoin go over $3,700 in the past 24 hours, and the rest of the market is lifted as a result.

The increased valuation of Bitcoin had a side effect of bringing Ripple (XRP) back over $0.30. Ethereum’s rise to just under $120 wasn’t enough to launch it into the second spot in the market cap rankings, where Ripple currently sits. This reporter still feels bearish about XRP, at least for the interim. Mass adoption is an important vector in considering the prospects of cryptocurrencies.

Flippening Lite

Litecoin price
Source: Shutterstock

The other notable happening on the markets was the reshuffling of the top 5 by market capitalization. Litecoin displaced EOS for the fourth spot in the rankings.

Litecoin grew more on its own merit than it did by virtue of the overall market capitalization increase, which was significant. Yesterday, as this capture shows, the overall market cap of the top 10 cryptos was around $95 billion. Today it’s more like over $103 billion.

Judging by the green percentages all the way down the top 100 cryptocurrencies, the money wasn’t coming from other crypto markets. It’s new money. The only big question is: will it stay or run? If we’re in a true bull run, anything is possible. Let’s keep in mind that sharp pops in either direction can often precede massive breaks in the opposite direction.

Bitcoin Price Stampedes Past $3,700

After some faltering in the $3,800 range on Bitfinex, Bitcoin is still shuffling up 8%. This is hundreds of dollars per share, in old world terms, which is a significant change that any user will feel. The purchasing power of BTC has increased overnight.

Bitfinex traders used levers to propel the price consistently higher than other markets.

As we said before, the money doesn’t appear to be entering from other wings of the crypto market. Instead, it’s new money. Bitcoin wasn’t the biggest gainer today. Litecoin holds that mantle. But Bitcoin’s gains are serious.

Where will we be Monday? Hardened crypto traders will tell you that’s a long time away. There are plenty of people who bought the extended dip, after all, and could dump on the renewed strong market.

Ethereum Gets Some Breathing Room

Ethereum has officially shoved off the $100 mark, to the relief of everyone. Ether needs to retain a strong market capitalization to float the thousands of tokens it supports.

Goodbye, $100! Cheap Ether might be on the way out.

Versus Bitcoin, Ether pulled out all the stops at Coinbase. If this is an indication as to how trading will go for Bitcoin in the coming days, prepare for a wild ride.

As we can see, most of the price shifts took place this morning. Could there be a psychological aspect to this? Everyone’s been expecting a big movement. At the same time, a comfortable majority of investors believe in the strength of crypto assets. Perhaps a few small changes catalyzed the bigger movements. Deeper data would need to be made public by Coinbase.

Perhaps in the future when decentralized exchanges are the rule of the day, we’ll be better able to analyze the size of the trades that actually precipitate these types of changes.

Litecoin is Absolutely Killing It

Litecoin’s been playing possum, it seems. Hovering around $30 over the past several weeks, with an occasional dip to $28 or on some markets worse, we were curious what would happen if Bitcoin’s price continued its downward trend but Litecoin’s didn’t.

Litecoin’s volume was double the norm. It also sustained double the gains of Bitcoin percentage-wise. The exercise shows Litecoin is no longer as reliant on Bitcoin as it was.

What we saw today was a similar story, however. Litecoin gained a lot more than any other top 10 crypto. By and large, on a day like this, you can attribute rises to the rise of Bitcoin itself. But Litecoin added half a billion. Charlie Lee reportedly increased confidence in Litecoin with his note that confidential transactions – the type available on Monero or Zcash (or even MimbleWimble) – are coming to LTC.

Litecoin’s future seems bright. It’s managing to maintain its price targets over massive trading volumes. The 24-hour volume for Litecoin was double the usual, at $1.5 billion. If this becomes the new norm, the next move for Litecoin could be back to the #2 market cap spot it hasn’t held for years.

Author: P.H. Madore 
Image Credit: Featured Image from Shutterstock. Price Charts from TradingView.

$136 Million in Missing Crypto From QuadrigaCX Could be Gone Forever: WSJ

Canada’s largest digital asset exchange QuadrigaCX has claimed to have lost more than $136 million worth of crypto in cold wallets controlled by its CEO Gerald Cotten.

In an official affidavit filed with the Nova Scotia Supreme Court by Jennifer Robertson, the widow of Cotten, Robertson claimed Cotten passed away in India with the sole control over user funds.

Affidavit Filed With Nova Scotia Supreme Court, Source:

On February 6, at a court hearing, the exchange confirmed that it has lost 250 million CAD, roughly $188 million in user funds, mostly in crypto and partially in fiat, which the exchange still cannot access.

According to CBC, a Canadian mainstream media outlet, 116,000 users of QuadrigaCX are currently left without their funds.

Controversy Intensifies, Missing Crypto May Be Gone, Not Locked

On Thursday, The Wall Street Journal reported that there exists a possibility the missing cryptocurrencies from QuadrigaCX may be missing, not locked in cold wallets.

Several researchers including James Edwards, an editor at Zerononcense, suggested that there is no evidence to prove the existence of QuadrigaCX’s cold wallets.

Most of the main wallets, those identified to date, are said to have processed the types of transactions that are normally not settled through cold wallets.

Cryptocurrency exchanges often go extra lengths to secure their cold wallets, which are offline wallets containing digital assets. To ensure the majority of user funds are out of the reach of hackers, exchange utilizes cold wallets to store most of its funds.

When a cold wallet transaction is initiated, as seen in one transaction initiated by Binance in November 2018, the transaction typically involves many millions of dollars.


However, most transactions initiated by the main wallets of QuadrigaCX were small in size and were processed at a rate in which it is difficult to justify they were cold wallets.

According to WSJ, researcher James Edwards obtained 50 accounts of QuadrigaCX clients and carried out an analysis of the addresses. Edwards could not link any of the addresses to the cold wallet QuadrigaCX is referring to.

The report published by Edwards read:

“Based on the analysis of dozens of aggregated wallet addresses and transaction IDs for bitcoin withdrawals and deposits on the exchange, there is no evidence that a cold wallet for QuadrigaCX is currently in existence.”

Speaking to CCN, MyCrypto CEO Taylor Monahan also suggested that there may be no cold wallets in existence for the Ethereum holdings.

While Monahan emphasized that one main wallet holding 500,000 transactions is yet to be analyzed, it is highly unlikely that it is a cold wallet.

“Oh, and just in case you weren’t shaking your head enough, don’t forget that Quadriga ran an exchange with KYC. They have a pile of user’s KYC data. They could turn around and open an exchange account with any of that KYC data to move money,” she added.

No Report Can be Definitively Proven But Suspicions Remain

As David Jevans, the CEO of CipherTrace, said, it is not possible to definitively prove any of the claims against QuadrigaCX and its lack of cold wallets is accurate.

“In my opinion, that’s an impossibility to determine,” Jevans said, referring to the reports that have been published since the QuadrigaCX case went public.

But, if funds in the supposedly lost wallets of QuadrigaCX, which are traceable on the public blockchain networks of Bitcoin, Ethereum, and other major crypto assets, then the story of QuadrigaCX could quickly fall apart.

For now, both investors and the cryptocurrency community are waiting on a thorough investigation to be completed in the QuadrigaCX situation.

The claims of researchers in the cryptocurrency sector are that if no cold wallets or reserves of the exchange cannot be identified, how would it be possible, whether it is the exchange or third-party firms to even attempt to recover millions of dollars in user funds?

Author: Joseph Young
Image Credit: Source: Shutterstock

Crypto CEO Dies Holding The Only Passwords That Can Unlock Millions In Customer Coins

Gerald Cotten’s sudden death left C$190 million ($145 million) in Bitcoin and other digital assets protected by his passwords unretrievable. Without the digital keys, clients lose access to digital coins and funds.


Digital-asset exchange Quadriga CX has a $200 million problem with no obvious solution — just the latest cautionary tale in the unregulated world of cryptocurrencies.

The online startup can’t retrieve about C$190 million ($145 million) in Bitcoin, Litecoin, Ether and other digital tokens held for its customers, according to court documents filed Jan. 31 in Halifax, Nova Scotia. Nor can Vancouver, B.C.-based Quadriga CX pay the C$70 million in cash they’re owed.

Access to Quadriga CX’s digital “wallets” — an application that stores the keys to send and receive cryptocurrencies — appears to have been lost with the passing of Quadriga CX Chief Executive Officer Gerald Cotten, who died Dec. 9 in India from complications of Crohn’s disease. He was 30.

Cotten was always conscious about security — the laptop, email addresses and messaging system he used to run the 5-year-old business were encrypted, according to an affidavit from his widow, Jennifer Robertson. He took sole responsibility for the handling of funds and coins and the banking and accounting side of the business and, to avoid being hacked, moved the “majority” of digital coins into cold storage.

His security measures are understandable. Virtual currency exchanges suffered at least five major attacks last year.

The problem is, Robertson said, that she can’t find his passwords or any business records for the company. Experts brought in to try to hack into Cotten’s other computers and mobile phone met with only “limited success” and attempts to circumvent an encrypted USB key have been foiled, his widow, who lives in a suburb of Halifax, said in the court filing.

“After Gerry’s death, Quadriga’s inventory of cryptocurrency has become unavailable and some of it may be lost,” Robertson said. The company’s access to currency has been “severely compromised” and the firm has been unable to negotiate bank drafts provided by different payment processors.

Quadriga CX’s directors posted a notice on the firm’s website Jan. 31 that it was asking the Nova Scotia court for creditor protection while they address “significant financial issues” affecting their ability to serve customers. On Tuesday, the court granted Quadriga a 30-day stay in a bid to stop any lawsuits from proceeding against the company, The Canadian Press reported. The firm was also granted protection from creditors.

“For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us,” the firm said. “Unfortunately, these efforts have not been successful.”

As is often the case with crypto, the episode has raised speculation on Reddit’s online forums, where posters are wondering aloud if the business was a scam, calling for class-action lawsuits and even concocting conspiracy theories that call into question whether the CEO is even deceased. The latest online speculation suggests that Quadriga CX funds have been moving — even though the firm claims they can’t get access.

Cotten filed a will 12 days before his death listing substantial assets, according to court documents.

He left all his assets to his wife and made her the executor to his estate, the documents show.

The will outlines numerous assets he held, including several properties in Nova Scotia and in Kelowna, B.C., a 2017 Lexus, an airplane, a Jeanneau 51 yacht and his pet chihuahuas, Nitro and Gully.

Author: Doug Alexander

Why the Latest Bitcoin Dump Could Actually Launch the Crypto Market into Bullish Territory

The bitcoin price on Wednesday depreciated as much as 2.56 percent on the back of a stronger US dollar. Paradoxically, that might not be such a bad thing for the crypto market.

The bitcoin-to-dollar exchange rate (BTC/USD) bottomed at $3,340 on an intraday basis, while retesting the low of January 29 trading session. There was a little attempt from bulls to reverse the price action with the bearish bias intact. Nevertheless, the pair consolidated above $3,340, which served as an opportunity to reclaim $3,400 in the near-term.

Bitcoin’s Six Triangles


In our previous analysis published Monday, we had predicted a bitcoin dump as the cryptocurrency’s volatility and volume went lower than normal. We also noted a strikingly similar pattern between bitcoin’s current and previous price actions. In this analysis, we aim to elaborate on the same to predict where the next bitcoin move could be.

In the Coinbase chart above, we can see bitcoin trending lower inside a falling wedge formation. Inside the wedge, the price consolidated inside a small symmetrical triangle (1). It attempted a breakout that eventually failed to blossom. The price reversed and formed a large bear flag, then continued to consolidate again inside a new symmetric triangle (2). The price action repeated four times, excluding the current scenario (6) which has yet to mature.

A Closer Look at the Bitcoin Price

Let’s have a closer look at the same chart.


As period 6 develops, bitcoin could form a smaller symmetrical triangle as it attempts to retest the falling wedge resistance to the upside (depicted as a dotted falling trendline). Meanwhile, the price would keep pressure on $3,430 to remain its interim resistance. Based on the previous price actions, bitcoin should continue its downside momentum. However, as we are reaching the apex of the falling wedge, the price should technically attempt a strong upside breakout action.

As we wrote in our previous analysis:

“Technically, a falling wedge pattern is a bullish indicator. It begins broadly at the top but squeezes as the asset moves lower while forming reaction highs and reactions lows that eventually converge. Upon closing in towards the cone’s apex, the asset undergoes a resistance breakout to find a new support area.”

Consequently, there is a strong chance for bitcoin to break above its wedge pattern on the next upside move. Traders should watch out for reversal indicators such as a doji — which occurs when a candle has an open and close at the same price — coupled with a spike in trading volume.

Conversely, an extended downside action would push the bitcoin price towards $3,100 – the current bottom level.

Author: Yashu Gola 
Image Credit: Featured Image from Shutterstock. Charts from TradingView.

Bitcoin Was ‘Total Bubble’ & 95% of Crypto ‘Will Die Painful Death’: Bitwise Exec.

The bitcoin bull market was a bubble that burst in 2018, but the “painful” event had a major upside: It attracted a lot of money and talent to the burgeoning industry. That’s the assessment of Matt Hougan, the global head of research at Bitwise, creator of the world’s first cryptocurrency index fund.

“It was a massive run-up and a massive pullback,” Hougan told Bloomberg’s Barry Ritholtz on his podcast. “[It was a] total bubble.”

While financial “bubbles” understandably carry a negative connotation, Hougan says the bitcoin bubble fueled intense media interest in blockchain and the crypto market.

Moreover, soaring crypto prices lured a tremendous talent pool to the industry that it otherwise might not have wooed but for the spectacular daily headlines in 2017.

Hougan: Bitcoin Bubble Resembles Tech Bubble

Bitwise research boss Matt Hougan: Bitcoin was definitely a bubble. (screenshot)

In this sense, Hougan says the bitcoin bubble is not dissimilar to the Internet bubble of 1996 to 2001, which imparted similar collateral benefits to the then-nascent tech industry.

“It did the same thing that happened with the Internet, which is it attracted a huge amount of talent. It did bring a lot of capital and interest in development to the ecosystem.”

“So, I do think interesting things will be born from that. But, yes, it was a difficult year in 2018.”

“I think [bitcoin] is the next dotcom. Remember, the dotcom bubble created, but it also created Amazon.”

Hougan also says that 95% of cryptocurrencies that exist today will crater into extinction ― and that’s a good thing for the market.

“There are 2,000 cryptocurrencies out there; 95 percent of them are useless and will die a painful death. The sooner that happens, the better.”

“But from those ‘ashes,’ will merge important things. Just like from the dotcom ashes emerged Amazon, Google, and Facebook, etc.”

So basically, Hougan says it’s important for the crypto market to purge all the sham virtual currencies so that the worthy ones can survive and thrive.

Bitcoin Is the New Millennial Gold

Hougan also says bitcoin is the millennial generation’s version of gold. He pointed to recent surveys showing that millennials (individuals born from 1981 to 1996) have a favorable view of cryptocurrencies compared to baby boomers (people born between 1946 and 1964).

“Every generation has an asset that they love or a way of getting exposure that they love.”

“The Greatest Generation love gold, then people loved active mutual funds. Gen X loved hedge funds. Millennials love crypto.”

Hougan attributes this to the decentralized nature of crypto, which cuts out the middle man. He believes that’s particularly appealing to the younger generation.

Hougan’s optimistic view of millennials is a stark contrast to that of CNBC analyst Scott Nations, who says millennials are too stupid to realize that bitcoin is a bubble they should avoid like the plague.

(Blockchain Capital/Twitter)

Matt Hougan: Don’t Lose Perspective

As for the crypto market’s wild daily price swings, Hougan noted that established corporate juggernauts like Amazon, Apple, and GE have all weathered massive stock market fluctuations on their rise to the top.

Accordingly, he doesn’t pay too much attention to the constant media hype that bitcoin is dead. He says all this cyclical lurching is part for the course, so everyone needs to calm down.

“Bitcoin’s gone through six or seven, 70 percent-plus drawdowns in the past. And each of those has set the stage for a new rally.”

“I’m not saying that will necessarily happen here, but it’s down 70 percent. It’s up 300 percent over last two years. So it depends on your perspective.”

Institutional Investments Will Come

Like bitcoin bull Mike Novogratz, Matt Hougan is confident that institutional money will eventually pour into the market; it’s just a matter of time.

To buttress this claim, Hougan noted that Fidelity is building up its blockchain unit to facilitate the mainstream adoption of crypto.

“Fidelity is hiring up to 150 people to build a way for institutional investors to buy crypto and store it with a name they trust. One of the greatest brand names in the future.”

“We know, we had conversations with 2,000 institutional and financial advisers last year. There is dramatic interest in crypto. They want good ways to get exposure.”

Author: Samantha Chang
Image Credit: Featured Image from Shutterstock

MyCrypto CEO: QuadrigaCX May Not Have Ethereum Cold Wallet, Where’s the Missing $150m?

Taylor Monahan, the founder and CEO of MyCrypto, one of the most widely utilized non-custodial wallets in crypto, has said that QuadrigaCX may never have had an Ethereum cold wallet.

Crypto Wallet CEO Raises Questions about QuadrigaCX’s Claims

After evaluating three main Ethereum addresses used by QuadrigaCX, Monahan said that all of the addresses were likely owned by customers, not by the exchange.

“Based o[n] the actions via ShapeShift, I can only assume they were trading the ETH for BTC on Bitfinex/Poloniex as well. Regardless, these were customer funds. All 3 main addresses ultimately receive ALL customer deposits, which were then sent to a variety of exchanges,” she said.

Earlier this month, as CCN extensively reported, Canada’s largest crypto exchange QuadrigaCX lost its access to customer funds worth $190 million in crypto and fiat.

The exchange stated that its CEO, who had sole control of the exchange’s cold wallet private keys, passed away and the firm is no longer able to access the funds as a result.

Experts Skeptical Toward QuadrigaCX Case, Can $150 Million in Crypto be Recovered?

Throughout the past several days, several reports claimed that QuadrigaCX’s cold wallet addresses have been moving funds.

But, most of the addresses turned out to be hot wallets given the size of the transactions initiated by the wallets.

Large exchanges often store the majority of user funds in cold wallets that are stored offline and cannot be targeted by hackers.

Exchanges like Binance and Coinbase are known to have implemented sophisticated systems to safeguard and protect holdings stored in cold wallets.

Before initiating transactions from cold wallets, major exchanges go through weeks to even months of planning to ensure no technical mishap occurs.

The three main addresses of QuadrigaCX evaluated by MyCrypto CEO Taylor Monahan sent many transactions to different wallets including the addresses of Bitfinex and Poloniex.

Considering that cold wallets of exchanges usually deal with millions of dollars in customer funds, the several thousand ETH sent out by the three wallets show they are unlikely to be the cold wallets of QuadrigaCX.

Speaking to CCN, Monahan said she has yet to evaluate the main ETH address of QuadrigaCX that contains more than 500,000 transactions.

But, based on the pattern of the three addresses, it is entirely possible that QuadrigaCX never had an Ethereum cold wallet.

“I’m seeing NO indication of Quadriga ever having cold / reserve wallets for ETH,” Monahan said.

The MyCrypto CEO added:

“Oh, and just in case you weren’t shaking your head enough, don’t forget that Quadriga ran an exchange with KYC. They have a pile of user’s KYC data. They could turn around and open an exchange account with any of that KYC data to move money.”

Red Flags

In previous interviews, as revealed by Cornell Professor Emin Gün Sirer, former QuadrigaCX CEO Gerry Cotten claimed that the exchange employed a multi-signature system to protect user funds.

A multi-signature system allows individuals or businesses to hold private keys to a certain address. Only when the majority of the keys are combined can the individuals or businesses obtain access to the funds stored in the address.

However, the exchange evidently had not employed a multi-signature system in all of its cold wallets because it was reported that the CEO had full control over the funds.

Jesse Powell, the CEO of Kraken, also raised suspicion on the case involving QuadrigaCX given the absurdity of the situation.

“We have thousands of wallet addresses known to belong to QuadrigaCX and are investigating the bizarre and, frankly, unbelievable story of the founder’s death and lost keys. I’m not normally calling for subpoenas but if the Royal Canadian Mounted Police are looking into this, contact Kraken,” he said.

Author: Joseph Young 
Image Credit: Featured Image from Shutterstock

‘Stay the Course’: Billionaire Bitcoin Bull Mike Novogratz Has Advice for the Bitter Crypto Winter

Mike Novogratz — the CEO of cryptocurrency merchant bank Galaxy Digital — admits that the Crypto Winter will probably last longer than he had anticipated. However, the Goldman Sachs alum still believes that institutional investors will eventually enter the market, and remains an avowed bitcoin bull.

Mike Novogratz ‘Very Confident’ of Institutional Entry

Novogratz tweeted: “Don’t think we head north for at least a few more months. Always take longer for institutions to move. Very confident they will. Tons of activity under the hood. Stay the course.”

Had Set $20,000 Bitcoin Price Target for 2019

The protracted market slump has caused many a crypto enthusiast to scale back their exuberance. And Novogratz is one of them.

In November 2018, Novogratz boldly set a $10,000 bitcoin price target for the end of the first quarter of 2019. He also predicted that bitcoin would top $20,000 this year.

But as the market slump continues with no signs of an immediate reversal, Novogratz has now apparently adopted a more sober outlook.

Crypto Executive: Stop Freaking Out

That said, don’t expect bitcoin stalwarts to jump ship anytime soon. We’re at the beginning of February, and there’s still almost 11 full months left in 2019.

Crypto evangelists like Dan Morehead — the CEO of bitcoin investment firm Pantera Capital — say it’s time for those with short-term mindsets to stop freaking out. Why? Because the industry has weathered bear markets before, and this one is different from the others, Morehead insists.

“In the previous one, I had more of a worry in the pit of my stomach about whether blockchain was actually going to work.

With this one, the underlying fundamentals are much, much stronger than they were in the 2014-2015 Crypto Winter.”

The Few Who Do Versus the Many Who Talk

Critics may say that bitcoin bulls like Dan Morehead, Mike Novogratz, the Winklevoss twins, and Circle CEO Jeremy Allaire are unrealistically optimistic. That’s probably because they have skin in the game.

They’re not just talking the talk; they’re walking the walk. They have invested a lot of their own money in the success of the industry. Therefore, they are highly motivated to ensure it thrives.

Last month, Novogratz increased his holdings in Galaxy Digital to 79.3% after acquiring an additional 2.7% of its outstanding shares for $5.4 million. He previously held a 76.6% stake.

The former Wall Street banker is now Galaxy Digital’s single largest shareholder, with 221 million shares. If that’s not a sign of conviction or personal accountability, it’s hard to say what is.

In response to skeptics who are gleefully cheering the current abysmal state of the market, Novogratz sagely points out that “revolutions don’t happen overnight.”

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These tech billionaires are bitcoin bulls. Would you bet against them? (YouTube screenshots)

Trader: Bitcoin Will Crater Into Extinction

Meanwhile, skeptics are betting that the crypto market will crater into extinction. Not surprisingly, the most vocal opponents are people from traditional financial institutions and legacy banks whose existence is threatened by the rise of the crypto industry.

Three weeks ago, futures trader Anthony Grisanti predicted that the bitcoin price would soon tank below $3,000 amid a mass sell-off.

Grisanti is an analyst at CNBC who previously traded energy futures at Bear Stearns. Like other crypto naysayers, Grisanti believes it’s only a matter of time before bitcoin totally collapses.

He claims that whenever the bitcoin price rallies a little, it’s because people are liquidating their positions. “Whether or not they’re liquidating outright or the futures, they are liquidating,” Grisanti claims.

CNBC Analyst: Bitcoin Fans Are Clueless

Grisanti’s fellow CNBC commentator, Scott Nations, also blasted bitcoin, saying it has no value. He also dissed millennial crypto fans, saying they’re too inexperienced to understand that they’re witnessing a bubble that’s bursting.

“If you are in your 20s, you have never seen an asset bubble. You were a teenager during the housing bubble. You were not even a teenager during the dotcom bubble. Well, baby, this is a bubble! And right now, it’s coming unglued.”

Author: Samantha Chang 
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Why Nasdaq’s Bitcoin Exchange Partnerships Prove the Crypto Industry is Growing up

A total of seven cryptocurrency exchanges have contracted with Nasdaq to use its surveillance technology. The technology, which has various products including SMARTS (which was adopted by Gemini), enables Bitcoin exchanges to identify fraudulent trading patterns.

How Nasdaq Evaluates Crypto Exchanges

According to Forbes writer Michael del Castillo, Bitcoin exchanges must have more than enough capital to cover the steep fees Nasdaq charges to license its technology. Nasdaq conducts a means test which focuses on the backgrounds of exchange executives as well as practices within them. Exchanges must list reputable tokens and must have a solid process through which they add them.

Only two exchanges have publicly revealed that they are using the Nasdaq technology. According to a Nasdaq exec, five more have passed the test and contracted to use the software. Gemini and SBI Virtual Currency both use Nasdaq’s program to monitor the use of their exchanges. The same tech is used by Nasdaq to assure investors that liquidity and volume of traditional assets are legitimate.

The question of honest volume has repeatedly come up over time in the cryptocurrency space in recent months. An in-depth study of volume reported by South Korea’s Bithumb found that the exchange was likely pumping its numbers.

Uncovered patterns show Bithumb would do as much as 95% of its volume in a space of two hours over a 24-hour trading day. Some tokens, like WaltonChain, were pumped to incredible heights this way. The metric of volume done on an exchange is one that plays an important role at various ranking sites and also helps traders determine where to do business. Exchanges with more volume have greater liquidity. The prices reflect real sentiments. That is, unless they’re falsifying said volume.

Honest Trading Volume Will Create A Bitcoin Market for Grown-Ups

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It’s hard to tell how many Bitcoin exchanges are faking volume numbers. | Source: Shutterstock

This reporter has been told by several experienced traders and industry insiders that nearly every Asian exchange fluffs its volume numbers. One researcher has even concluded that it’s impossible for exchanges not to be faking volume and even prices – the business model is so hard to profit from, it wouldn’t make sense otherwise. The rapidity with which exchanges have to respond to declining interest in cryptocurrency demonstrates they’re not making enough, after all. A well-tuned business model will give a company reserves to weather long periods of poor performance.

Gemini is a hyper-regulated exchange. They’re so regulator-friendly that they advertise based on their status. They are far from the most popular exchange. Assuming their volume is honest (no indications to the contrary), they rank 65th by adjusted volume at press time.

A Crypto-Native Solution Might Be Necessary

Booming crypto exchanges like Binance might be better off building their own surveillance technology rather than licensing it from the legacy financial sector. | Source: Shutterstock

Binance is king and has been since it took the scene by storm. It likely would not pass the means test in terms of the tokens it lists – mostly anything the customers want. Binance is more likely to create their own monitoring product than outsource the job, however. More than once, they have acted to ensure justice in the case of stolen funds or questionable business practices.

As the Bitcoin industry grows up and goes mainstream, it will be necessary that Nasdaq’s surveillance software or something like it is operational on crypto markets. Such things ensure that everyone’s playing by the same rules.

However, as del Castillo writes:

“In crypto, innovation would come not from top down but from the grassroots. While Nasdaq has shown a willingness to work with some unusual clients in the crypto space, the ones we know about support what these questions reveal about Nasdaq’s interest in working with proven entities, something other regulated exchanges and technology providers will likely follow.”

Indeed. An innovative alternative to Nasdaq technology may be in order. Companies like Chainalysis and Elementus already work in this space. Blockchains are about transparency. A crypto-native solution would probably gain more favor among crypto exchanges.

Questionable exchanges — along with hacks, theft, and usability problems — are still chief among the problems that crypto faces in gaining mass adoption.

Image Credit: Featured Image from Shutterstock